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Managing contract performance: A transaction costs approach


  • Trevor L. Brown

    (School of Public Policy and Management, The Ohio State University, Columbus)

  • Matthew Potoski

    (Department of Political Science, Iowa State University, Ames)


Managing contracts is a complex process, often exacerbated by high transaction costs inherent in negotiating, implementing, and monitoring contract relationships with vendors. Through analyses of data from a 1997 International City|County Management Association survey of municipal and county governments, the way in which municipal and county governments respond to transaction cost factors inherent in contract service delivery is examined. The results of the analyses demonstrate that when governments contract for services in contexts that risk contract failure, they engage in a variety of monitoring techniques to improve their ability to monitor and correct vendor performance. © 2003 by the Association for Public Policy Analysis and Management.

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  • Trevor L. Brown & Matthew Potoski, 2003. "Managing contract performance: A transaction costs approach," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 22(2), pages 275-297.
  • Handle: RePEc:wly:jpamgt:v:22:y:2003:i:2:p:275-297 DOI: 10.1002/pam.10117

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    References listed on IDEAS

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    2. Germa Bel & Anton Costas, 2006. "Do Public Sector Reforms Get Rusty? Local Privatization in Spain," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 9(1), pages 1-24.
    3. Amir HEFETZ & Mildred E. WARNER, 2010. "Dynamics of service provision: service, market and place characteristics," Departmental Working Papers 2010-33, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    4. Germà Bel & Xavier Fageda & Melania Mur, 2011. "Privatization, cooperation and costs of solid waste services in small towns," IREA Working Papers 201111, University of Barcelona, Research Institute of Applied Economics, revised Jul 2011.
    5. Abelson, Julia & Gold, Sara Tedford & Woodward, Christel & O'Connor, Denise & Hutchison, Brian, 2004. "Managing under managed community care: the experiences of clients, providers and managers in Ontario's competitive home care sector," Health Policy, Elsevier, vol. 68(3), pages 359-372, June.
    6. David, Guy & Chiang, Arthur J., 2009. "The determinants of public versus private provision of Emergency Medical Services," International Journal of Industrial Organization, Elsevier, vol. 27(2), pages 312-319, March.
    7. Xavier Fageda & Germa Bel, 2008. "Local privatization, intermunicipal cooperation,transaction costs and political interests: Evidence from Spain," IREA Working Papers 200804, University of Barcelona, Research Institute of Applied Economics, revised Apr 2008.
    8. Mulkeen Majella, 2016. "Going to market! An exploration of markets in social care," Administration, De Gruyter Open, vol. 64(2), pages 33-59, August.
    9. Daniel Albalate & Germà Bel & Xavier Fageda, 2012. "“Beyond pure public and pure private management models: Mixed firms in the European Airport Industry”," IREA Working Papers 201221, University of Barcelona, Research Institute of Applied Economics, revised Dec 2012.
    10. Germa Bel & Xavier Fageda, 2008. "Reforming the local public sector: economics and politics in privatization of water and solid waste," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 11(1), pages 45-65.
    11. Giuseppe Cinquegrana & Serena Migliardo & Domenico Sarno, 2016. "Comparative analysis of private and public provision of the water and waste services by the Italian municipalities," ECONOMIA PUBBLICA, FrancoAngeli Editore, vol. 2016(3), pages 149-176.
    12. Marius Constantin PROFIROIU & Septimiu Rares SZABO, 2016. "Outsourcing vs decentralisation: A comparative analysis in Central and Eastern Europe," Eco-Economics Review, Ecological University of Bucharest, Economics Faculty and Ecology and Environmental Protection Faculty, pages 3-26.
    13. Matthew Holian, 2009. "Outsourcing in US cities, ambulances and elderly voters," Public Choice, Springer, vol. 141(3), pages 421-445, December.
    14. Germà Bel & Jordi Rosell, 2016. "Public and Private Production in a Mixed Delivery System: Regulation, Competition and Costs," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 35(3), pages 533-558, June.
    15. Murphy Haley & Robichau Robbie Waters, 2016. "Governmental Influences on Organizational Capacity: The Case of Child Welfare Nonprofits," Nonprofit Policy Forum, De Gruyter, vol. 7(3), pages 339-367, September.
    16. Germà Bel & Xavier Fageda, 2008. "Privatization and competition in the delivery of local services: An empirical examination of the dual market hypothesis," Working Papers XREAP2008-04, Xarxa de Referència en Economia Aplicada (XREAP), revised Apr 2008.
    17. Pierre Koning & C.J. Heinrich, 2009. "Cream-skimming, parking and other intended and unintended effects of performance-based contracting in social welfare services," CPB Discussion Paper 134, CPB Netherlands Bureau for Economic Policy Analysis.
    18. Miguel Cruz, Antonio & Maria Rios Rincon, Adriana, 2012. "Medical device maintenance outsourcing: Have operation management research and management theories forgotten the medical engineering community? A mapping review," European Journal of Operational Research, Elsevier, vol. 221(1), pages 186-197.
    19. Whitney Ruble, 2015. "The Effect of Contracting Out Low Performing Schools on Student Performance," Working Papers 1521, Tulane University, Department of Economics.
    20. Giuseppe Gori & Patrizia Lattarulo & Marco Mariani, 2014. "The effect of Regional Law 35/2011 on strategic public works," Studi e approfondimenti 521, Istituto Regionale per la Programmazione Economica della Toscana.

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